COST COULD INCREASE FOR CREDIT CARD USE

Change is part of settlement over alleged price-fixing on swipe fees

Retailers will be able to charge their customers more for paying with credit cards under terms of a multibillion-dollar antitrust settlement announced late Friday.

MasterCard, Visa and major banks, including JPMorgan Chase and Bank of America, agreed to pay more than $6 billion to settle accusations that they engaged in anticompetitive practices in payment processing.

The settlement is the culmination of a lawsuit brought in federal court on behalf of about 7 million merchants in 2005. Merchants said the companies engaged in price-fixing to charge high fees for processing credit and debit card payments.

In addition, the merchants claimed, the payment processors unfairly banned stores from charging credit card customers more for their purchases.

If the proposal is approved by a judge and fully executed, it would represent the largest private antitrust settlement in history.

“Reducing these fees will reduce costs, ultimately resulting in lower prices for consumers,” said Patrick J. Coughlin, senior trial counsel at San Diego-based Robbins Geller Rudman & Dowd and one of the merchants’ attorneys.

Joseph Saunders, chief executive of Visa, reiterated that the settlement was in the best interest of all the parties. Together, MasterCard and Visa have agreed to pay $5.2 billion.

As part of the settlement, MasterCard and Visa additionally agreed to reduce the charge to process transactions for eight months. That fee reprieve is estimated by the plaintiffs to be worth $1.2 billion.

According to the National Retail Federation, the nation’s largest retail group, swipe fees cost retailers about $30 billion per year. Duncan Mallory, senior vice president and general counsel for the group, said the settlement is a step in the right direction.

“What we need are changes in the rules that bring about transparency and competition that would be here for years to come,” he said.

Ann Kinner, owner of Seabreeze Books and Charts in Point Loma, said small merchants have been at the mercy of credit card companies.

“Anything that gets them to be a little more honest about their fees is an improvement,” she said.

The dispute between stores and banks dates back to 2005. That’s when large retailers, including Kroger, Safeway and Walgreen, began filing price-fixing lawsuits against Visa, MasterCard and major banks.

The retailers claimed the credit card issuers worked together to fix the fees that stores pay to accept credit and debit cards. The fees, which vary depending on the type of store and the type of card, average about 2 percent of the price of a purchase.

The fees are set by card processing networks but collected by, and split with, the banks that issue the cards.

The card companies long have defended the fees. They say stores benefit from being able to accept credit and debit cards from customers, who often spend more when they’re using plastic instead of cash or checks.

Last year, retailers won another victory over what financial firms can charge them when customers use a different form of plastic, the debit card.

Under the Dodd-Frank financial reform law, banks had to reduce “swipe fees” that they collect from merchants each time a customer makes a purchase with a debit card.